Chap06 Job Order Costing

8/10/2019 Chap06 Job Order Costing

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Job Order Costing


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Learning Objective 1

Distinguish between job

costing and process costing.


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Job-Costing and

Process-Costing SystemsJob-costing

system

Process-costing

system

Distinct unitsof a product

or service

Masses of identicalor similar units of

a product or service


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The Job Cost SheetRoseCo Job Cost SheetJob Number A - 143 Date Initiated 3-4-X9

Date Completed

Department B3 Units Completed

Item Wooden cargo crate

Direct Materials Direct Labor Manufacturing Overhead

Req. No. Amount Ticket Hours Amount Hours Rate Amount

X7-6890 116$

Cost Summary Units ShippedDirect Materials 116$ Date Number Balance

Direct Labor

Manufacturing Overhead

Total Cost

Unit Cost


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Date Completed

Department B3 Units Completed




X7-6890 116$ 36 8 88$


Direct Labor 88$


Total Cost

Unit Cost

Accumulate

direct labor

costs bymeans of a

work record,

such as a time

ticket, for eachemployee.


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Date Completed 3-5-X9

Department B3 Units Completed 2




X7-6890 116$ 36 8 88$ 8 4$ 32$


Direct Labor 88$

Manufacturing Overhead 32$

Total Cost 236$

Unit Cost 118$

Apply manufacturing overhead to jobs using a

predetermined overhead rate (POHR) based on direct

labor hours (DLH).


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Outline a seven-step

approach to job costing.


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Seven-Step Approach

to Job CostingStep 1:

Identify the chosen cost object.

Step 2:Identify the direct costs of the job.

Step 3:

Select the cost-allocation bases.

Step 4:

Identify the indirect costs.


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Seven-Step Approach

to Job Costing

Step 5:

Compute the rate per unit.Step 6:

Compute the indirect costs.

Step 7:Compute the total cost of the job.


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General Approach to Job Costing

A manufacturing company is planning to sell

a batch of 25 special machines (Job 650) to a

retailer for $114,800.

Step 1:

The cost object is Job 650.

Step 2:Direct costs are: Direct materials = $50,000

Direct manufacturing labor = $19,000


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Step 3:

The cost allocation base is machine-hours.Job 650 used 500 machine-hours.

2,480 machine-hours were used by all jobs.

Step 4:Manufacturing overhead costs were $65,100.


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Step 5:

Actual indirect cost rate is$65,100 2,480 = $26.25 per machine-hour.

Step 6:

$26.25 per machine-hour 500 hours = $13,125


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Step 7:

Direct materials $50,000Direct labor 19,000

Factory overhead 13,125

Total $82,125


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What is the gross margin of this job?

Revenues $114,800Cost of goods sold 82,125

Gross margin $ 32,675

What is thegross margin percentage?

$32,675 $114,800 = 28.5%


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Source Documents

Job cost record

Materials requisition record

Labor time record


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Track the flow of costs

in a job-costing system.


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Transactions

Purchase of materials and other manufacturing inputs

Conversion into work in process inventory

Conversion into finished goods inventory

Sale of finished goods


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Transactions

$80,000 worth of materials (direct and

indirect) were purchased on credit.

Materials

Control

1. 80,000 1. 80,000

Accounts Payable

Control


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Transactions

Materials costing $75,000 were sent to the

manufacturing plant floor.$50,000 were issued to Job No. 650 and

$10,000 to Job 651.

$15,000 of indirect materials were issued.

What is the journal entry?


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Transactions

Work in Process Control:

Job No. 650 50,000Job No. 651 10,000

Factory Overhead Control 15,000

Materials Control 75,000


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Transactions

Materials

Control1. 80,000 2. 75,000

Work in Process

Control2. 60,000

ManufacturingOverheadControl

2. 15,000Job 650

2. 50,000


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Transactions

Total manufacturing payroll for

the period was $27,000.

Job No. 650 incurred direct labor costs

of $19,000 and Job No. 651 incurred

direct labor costs of $3,000.

$5,000 of indirect labor was also incurred.



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Transactions

Work in Process Control:

Job No. 650 19,000Job No. 651 3,000

Manufacturing Overhead Control 5,000

Wages Payable 27,000


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Transactions

Wages PayableControl

3. 27,000

Work in ProcessControl

2. 60,0003. 22,000

Manufacturing

OverheadControl2. 15,0003. 5,000

Job 6502. 50,0003. 19,000


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Transactions

Wages payable were paid.

Wages Payable

Control

4. 27,000 4. 27,000

Cash

Control

Wages Payable Control 27,000Cash Control 27,000

3. 27,000


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Transactions

Assume that depreciation for the

period is $26,000.Other manufacturing overhead

incurred amounted to $19,100.



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Transactions


Accumulated DepreciationControl 26,000

Various Accounts 19,100

What is the balance of the ManufacturingOverhead Control account?


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Transactions

$62,000 of overhead was allocated to the

various jobs of which $12,500 went to Job 650.Work in Process Control 62,000


What are the balances of the control accounts?


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Transactions


Control

Work in Process

Control2. 15,000

3. 5,000

5. 45,100Bal. 3,100

2. 60,000

3. 22,000

6. 62,000Bal. 144,000

6. 62,000


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Transactions

The cost of Job 650 is:

Job 650

2. 50,000

3. 19,000

6. 12,500Bal. 81,500


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Transactions

Jobs costing $104,000 were completed and

transferred to finished goods, including Job 650.What effect does this have on the control accounts?


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Transactions

Job 650 was sold for $114,800.


Accounts Receivable Control 114,800

Revenues 114,800

Cost of Goods Sold 81,500Finished Goods Control 81,500


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Transactions

What is the balance in the Finished Goods

Control account?$104,000$81,500 = $22,500

Assume that marketing and administrative

salaries were $9,000 and $10,000.



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Transactions

Marketing and Administrative Costs 19,000

Salaries Payable Control 19,000


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Transactions

Direct Materials Used $60,000

Direct Labor and Overhead $84,000

Ending WIP Inventory $40,000

Cost of Goods Manufactured $104,000

=

+


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Transactions

Cost of Goods Manufactured $104,000

Ending Finished Goods Inventory $22,500

Cost of Goods Sold $81,500=


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Account for end-of-period

underallocated or overallocated

indirect costs.


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End-Of-Period Adjustments

Underallocated indirect costsOverallocated indirect costs

Manufacturing

Overhead Control

Bal. 65,100

Manufacturing

Overhead Applied

Bal. 62,000


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End-Of-Period Adjustments

How was the allocated overhead determined?

2,480 machine-hours $25 budgeted rate = $62,000

$65,100$62,000 = $3,100 (underallocated)


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End of Chapter

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